The naming of Urjit Patel comes after months of drama over whether Raghuram Rajan and the government were getting along, and whether Rajan would be granted an extension. Ever since Rajan, in an unprecedented letter to his colleagues in June, said he was opting out of a second term at the helm of India’s central bank, speculation has been rife over who his successor would be – particularly given the outspoken nature of the incumbent and the eyebrows he raised.
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The government on Saturday appointed Deputy Governor Patel as the 24th head of the Reserve Bank.
Investors have heard little from Dr Patel during his 31/2 years as deputy governor as he has rarely spoken publicly.
To add to it, he also has experience of working with International Monetary Fund between 1990 and 1995 where he covered the US, India, Bahamas and Myanmar desks. In the past, he has also worked with Reliance Industries, IDFC and was also a board member of the Gujarat State Petroleum Corporation.
It is relevant in this context to examine the backdrop to Rajan holding the RBI’s repo, or short-term lending rate, at 6.5 percent in his last monetary policy review earlier this month.
At the final rate-setting meeting of Rajan as RBI chief, the bank kept the interest rates unchanged in August. Some scope for rate cuts may emerge as upside risks to RBI’s inflation target are lowered but it does not expect repo rate to be lower than 6% in FY17.
“He has to maintain a balance in growth and monetary policy, hope he will be successful in controlling inflation”, Meghwal said.
At home, he is seen as carrying less political baggage than Mr Rajan, which may help Mr Patel in his dealings with Mr Modi and Finance Minister Arun Jaitley.
Experts feel that appointment of Patel, who has worked with Rajan for several years, as the next RBI Governor will ensure continuity in the monetary policy.
Arundhati Bhattacharya, chairman of State Bank of India, said, “Appointment of Urjit Patel comes as a welcome move”. As Rajan has won respect for building confidence of the investors during his tenure, the Government can initiate more reforms in the vital sectors of the economy which it is already doing, can very well support Patel, without shaking the country’s growing spree.
The government is soon expected to announce the composition of a six-member monetary policy committee to decide on interest rates.
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His views on monetary policy were expressed at the time Rajan held rates in the February 2015 review after making an unexpected rate cut the previous month – the first in almost two years. From the RBI’s quota of three, two will be the governor and the deputy governor in-charge of monetary policy, while a third one has to be recommended by the RBI board.
